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Here's an interesting idea: that Netflix is, essentially, going to be toast soon enough. No, not because of any paucity of management, any mistakes that have been made, but just because of the simple economics of the market they're in. I don't think I'd argue that this is necessarily true but it's most certainly possibly true. It's Armando Kirwin over at Techcrunch who rather puts the boot in:

So how does this relate to Amazon and Netflix? Like the exhibitors, tech companies need to make deals with Hollywood in order to get their hands on the content that their customers want. And just like the exhibitors, Hollywood will attempt to capture as much of the value of this content as possible — and succeed. Finally, like the exhibitors (noticing a trend?), this will force tech companies to make their profits elsewhere if they’re not already.

We can put the argument into other terms: profit flows to whoever it is that has the rare or scarce thing.

This doesn't by any means, mean that profit flows to those who create the content. Not necessarily, at least. It's newspapers that create a lot of web content and it sure ain't them making the profits. That's Google, for Adwords, the ability to monetise page views seems to be the rarity in that market.

However looking at movies, that really does seem to be something that Hollywood, at least in the English speaking world, has a lock on. So, we would expect the majority of the profits from showing movies to flow to Hollywood. Except, unless, whoever doing the distribution has something that is rare. In which case they might well be able to capture some goodly portion of the total available profits.

Which brings us to Netflix. They certainly used to have something rare: that whole distribution channel of people getting DVDs in the mail and sending them back. But when it comes to streaming, or online delivery, is their infrastructure that rare? And even if it is, is it going to continue to be so? It's certainly arguable that with everyone and their grandmother trying to get into this space that there isn't actually all that much rarity that profit can be gleaned from.

And then of course the fact that everyone and granny is trying to purchase the rights to stream content means that the price of content worth streaming just goes up. That's the mechanism by which Hollywood gains the majority of the available profits. And it gets worse too: we've got Amazon reportedly spending a billion a year on such content. And there's no real reason to assume that they're seeing those purchases as the source of a standalone profit centre. Amazon generally doesn't do things that way: they're quite prepared to spend seemingly vast sums of money on continually expanding their offerings and assuming that sheer volume will make a profit somewhere.

This really isn't a situation I'd be happy in. Netflix, at least if you view it one way, has nothing particularly rare or valuable, so will find it difficult to carve out a profit. And it also has competitors with deeper pockets who are driving up the prices of its raw material: the rights to stream movies.

As I said at the top, I'm not sure if this is necessarily the future of the company. But it is certainly a possible future: for profits flow to those with the rare item in any chain. And what is it that Netflix has that is rare, now we're in a streaming world?